America’s leading retailer of books and digital content Barnes & Noble (BKS, Financial) recently came out with the fiscal year 2015 first-quarter earnings, and let’s just say the bad wasn’t that bad. While the retailer again reported a red bottom line, the magnitude of the loss narrowed down a lot. In fact, analysts following the stock are decently happy about the quarter’s numbers, with some even upgrading their ratings on the stock. Let’s take a quick look at the performance of the company during the three-month period.
Barnes & Noble Bookstore in Clifton, Photo by Luigi Novi, Source: Wikimedia Commons
Into the numbers
Investors are glad with the way the retailer is performing, hinting at the fact that the business is stabilizing, and on the back of this, shares have jumped more than 50% year to date. Barnes & Noble reported consolidated revenues of $1.2 billion, down 7% compared to the prior year period, and a loss per share of $0.56, significantly lower than prior year’s loss of $1.56 a share, beating analyst estimates of $0.68. All this was supported by the improving earnings before interest, taxes, depreciation and amortization (EBITDA) that moved up to $30 million from the negative $9 million a year ago.
During the quarter, comparable store sales plunged 5.1% triggered by lower sale of NOOK products. This along with declining online sales and store closures pulled down retail sales and the top line. The positive in all this was that the core comparable bookstore sales continued to improve, compared to the fiscal year 2014 levels, and accounted for almost 70% of the total volume growth. The negative effect of poor NOOK and associated product sales were nullified to some extent by the improved in-store traffic due to better stocks of books, toys and games, and also by all the promotional and advertising activities the retailer had taken up.
What’s going on with the Nook segment?
The gradually fading NOOK business is becoming a point of concern for the retail major. During the quarter, revenue from the segment fell drastically by 54.3% to $70 million, raising questions about the possible future of the business. The decline was caused by the poor digital sales that shrunk 24.2% to $52 million and accessories sales that were down 78.6% to $18 million. While the reduced hardware revenue is a yellow card, the dropping digital content sales are giving the management sleepless nights.
However, the management is on its toes to improve the situation. Recently, on August 20, Barnes & Noble launched the latest NOOK tablet in collaboration with Korean tech major Samsung (SSNLF, Financial). The Samsung Galaxy Tab 4 Nook is the retailer’s first co-branded tablet that promises to provide its users a superior reading experience. The New York-based retailer is banking quite heavily on this latest gadget to revive its rather dismal digital content sales. While Samsung will take care of the hardware and tech specs, Barnes & Noble will focus on digital reading technology and content.
Industry experts believe this latest move from the bookseller will draw consumers’ attention, thanks to the Samsung brand’s value and the Google (GOOG, Financial) Android experience. There’s another reason why the latest NOOK is crucial for the retailer. In the digital content space, the Samsung Galaxy Tab 4 Nook will play a vital role in competing against Amazon (AMZN, Financial), a competitor with whom Barnes & Noble has been locked in arm wrestling matches for quite some time now.
Final words
Barnes & Noble has been going through some troubled times and the top and bottom lines are not up to the scratch. However, better-than-anticipated performance and the narrowing losses are keeping the faith alive in investors. It would be interesting to see how the company fares in the ongoing quarter, especially now that the latest NOOK is there to provide some support.
